Increasing Afghan revenue collection

Uzair Ali describes Increasing Afghan revenue collection

By the looks of it the Increasing Afghan revenue collection economy under the Taliban regime is not in a good state as the landlocked country has far less resources to earn than required for running the country. Afghans are struggling to make ends meet amid an economic crisis that has disrupted basic services, left them with rising costs and dim employment prospects and battered the health and financial sectors. But the country’s Taliban leaders, limited to domestic revenue to fund its first annual budget, have found ways to raise revenue even more. To fund the growing needs of the country the Taliban regime has devised an economic strategy that has impressed experts and for raising finances the Taliban intended relying heavily to collect taxes and on the increased export of valuable natural resources like coal.

The current scenario in Afghanistan points to the transition of Taliban from insurgents to bureaucrats though is not entirely surprising as during their 20-year armed struggle they established a shadow government in many areas they controlled that included courts, regional governors and a tax system to fill their war chest. They ran a customs service that managed toll booths for the insurgency in Farah province, bordering Iran and Balkh, bordering Uzbekistan, roving the territory on motorbikes to evade capture. They acquired practical experience of running government placing emphasis on collecting money for waging their campaign against the foreign occupation and its puppet government. This experience came very handy when the Taliban got control of the country.

In this context it is mentioned that the ability of the Taliban regime to raise revenue has far-reaching implications as in wake of the pressure exerted by the international community particularly western countries on Afghanistan on many counts particularly about the restrictions placed on women’s rights and curbing many other freedoms that run contrary to their belief-system. Not only the international community has shown its irritation about the policies pursued by the Afghan Taliban regime but it has also imposed financial sanctions. In order to overcome this difficulty, their ability to raise domestic revenue grants them greater independence and mobility to maneuver. The situation is though highly confusing as sanctioning Afghanistan also presents a dilemma for the western world as their hard line actions prevent provision of humanitarian support to the country.

So far the Taliban administration is proving adept at collecting tax and it is widely noted that their efforts are free of corruption that was associated with the previous government resulting in growing financial figures. The Taliban regime apparently has cleaned up corruption in the collection of taxes and from the illegal mining and export of natural resources. It has also reactivated an e-filing system and suspended fines for late tax payments to help ensure citizens pay up. Many financial experts view this development with silent feeling of encouragement and point out that the Taliban are not doing badly at all comparing the dire economic situation their country is facing. They mention that in terms of running the government, the revenue they are raising is probably adequate if they spend it properly.

Aside from generating funds from customs, taxes, and mining, however, the Taliban has yet to specify exactly where the money will come from for financing their governmental activity. There is one certainty that Afghans can expect to pay more taxes for everything from moving goods on highways to hanging a sign in front of a shop. But the Taliban government’s lack of transparency and the loss of essential services make it difficult to see what citizens are getting in return. Foreign trade has fallen off dramatically since the Taliban took power and the foreign aid that once propped up the Afghan economy has evaporated, leaving the Taliban to fund their government on its own. It must be kept in mind that the previous, Western-backed government worked on a budget of around $6 billion in 2021 before the Taliban seized power. That budget forecast domestic revenue of 216.5 billion afghanis ($2.7 billion) but was hampered by the Coronavirus pandemic and large military expenditures. Revenue was more than matched by $3.3 billion of foreign grants.

Currently, the Afghan regime is taking advantage of the abundant cargo of fruit and coal exported to Pakistan that is paying the Taliban authorities for the privilege of passage. In Kabul, a patrol of accountants inspects a bazaar, billing shopkeepers for trading honey, hair conditioner and gas hobs under the snapping white flag of the country’s new rulers. Though Afghanistan is mired deep in humanitarian turmoil since the Taliban seized power but cash is changing hands at a dizzying pace. The Taliban administration is proving adept at collecting tax that goes directly into the government coffers without any monies stolen by corrupt officials. Most of the domestic revenue comes from customs and taxes, with most of the operating budget used to pay government wages and salaries and 35 per cent going toward infrastructure, agriculture and health. Despite increasing revenue, government employees have reported difficulties getting paid, food and fuel prices have soared, and the education and health-care systems are in shambles. As the regime introduces, enforces, and increases levies across the board, Afghans say they are getting next to nothing back and have called for relief.

Even as the Taliban authorities have pledged to find ways to lower rising heating costs and provide more electricity to industries and large cities, they are boosting exports of a crucial natural resource needed for those efforts– coal — to help feed the budget. Accordingly the Taliban regime has stepped up coal exports to neighbouring Pakistan as it aimed to generate more revenue from Afghanistan’s mining sector and capitalise on record prices for coal. Global supplies have fallen due to Russia’s war against Ukraine and top exporter Indonesia’s ban on exports. The Taliban has reportedly collected more than $33 million in customs revenue in the last six months and boosted coal exports to 1.8 million tons in the past year, a rise of 16 per cent. To further boost the budget, the Taliban last month reportedly increased its taxes on coal exports from 20 per cent to 30 per cent. Most of the coal is being exported to Pakistan and is coming mainly from 17 mines across Afghanistan. Most of the coal is taken from artisanal mines that have traditionally been seen as a major source of corruption and infighting.

In late January, the World Bank reported strong revenue collection at 136 billion Afghani ($1.5 billion) over the first nine months of 2022 broadly in line with the final full year of the US-backed regime. It has been reported quite consistently that they are doing quite well on revenue and that too is happening when economic activity is quite subdued. Though the revenue is rising yet it is pointed out that about 60 per cent of the Taliban treasury is funded by customs raised at tumbledown checkpoints like Torkham in eastern Nangarhar province where trucks trade rubber-stamped paperwork for cash. Incoming freight is mostly food — oranges, potatoes and World Food Programme (WFP) flour but the outgoing lane is dominated by a convoy of lavishly painted trucks loaded with chromite and coal. It is projected that coal exports to Pakistan will likely double under the Taliban government and earned Afghanistan $160 million in tax that is three times what the previous administration was capable of. TW